The popular Argentine manager was appointed in 2011 and helped Atletico to win the league in 2014, as well as reaching two Champions League finals, both of which ended in defeats by rivals Real Madrid.
"He started his seventh campaign as Atletico manager this season, the coach in La Liga with the most time at the helm of his team, and only Arsene Wenger (at Arsenal) beats him in terms of elite European sides," said Atletico in a statement.
Simeone, who has won five trophies while Atletico coach, guiding them through arguably their most successful era, renewed his contract to 2020 in 2015, but agreed to a two-year reduction on that in September 2016.
(Reporting by Rik Sharma; Editing by Clare Fallon)
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